Types of Companies: A Quick Overview

This document provides an overview of different types of companies and their working mechanisms. It explores micro businesses, small businesses, medium businesses, and large businesses. It also discusses the structures of sole proprietorships, partnerships, limited liability businesses, public limited liability businesses, and cooperatives. Additionally, it examines the impact of organizational structure and external factors on business productivity, including a PESTLE analysis.

BSc (Hons) Business Management with
Foundation
BMP3002
Business in Practice
Assessment 1
Types of Companies
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Contents
Introduction 2
Section 1: Different types of companies and how they work
2
Section 2: Different companies from sole traders to cooperatives
and Limited Liability Partnerships 4
Section 3: Different businesses structures and internal factors
affecting business 6
Conclusion 8
Reference List 10
1

Introduction
The purpose of this paper is to provide a quick overview of the numerous
sorts of firms that exist in today's business world. With several examples, the paper
investigates how firms are classified depending on their nature and liabilities. The
importance of the organizational structure is also underlined in the survey, and the
two key structures are briefly identified. The report also provides PESTEL analysis to
gain access to the impact of external factors on commercial activities.
Section 1: Different types of companies and how they work
MICRO BUSINESS
A micro business is a form of small enterprise that meets the following
conditions to be classified as a ‘micro-entity.' One of the criteria is that the number of
employees shall not exceed ten. The yearly turnover cannot exceed £632,000, and
the balance sheet total cannot exceed £316,000. This type of microbusiness is
frequently launched with the same amount of capital, and the same individual
manages, operates, and controls it. There are approximately 9.1 million people
working in these organizations. Consequently, these micro-enterprises support the
British economy (Ott and Dicke, 2021). Micro-enterprises are essential to the
economic survival of the country In addition, it is beneficial to the economy by
focusing on less-favored rural and urban areas. In the United Kingdom, however,
there are 5.7 million micro enterprises, with 95.72 percent of them being privately
held. It contributes to the economy by stabilizing social stability among the regions of
the United Kingdom. Family enterprises or inventive start-ups created by young
individuals with a strong ambition to succeed in a competitive market are illustrations
of this type of business.
SMALL BUSINESS
Privately held enterprises with fewer workers and smaller yearly sales than
major corporations fall under this category. The Companies Act of 2006 in the United
Kingdom stipulates that the number of workers shall not exceed fifty. Moreover, the
annual turnover must not exceed GBP 6, 5 million and the balance sheet total must
not exceed GBP 3, 26 million. Small businesses operate on a self-sustaining income
and size basis. Locally and nationwide, the company hopes to help by creating jobs
and perhaps contributing more too financing. One of its key features is that small
businesses adapt more rapidly to changes in demand and the environment because
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they are not limited by bureaucratic lethargy. Even this type of enterprise contributes
significantly to the national economy. Consequently, they help to sustain the
economy of the local region. Examples of private enterprises are sole
proprietorships, partnerships or companies (Savvides and Stavrou, 2021). The small
business comprises bakeries, privately held restaurants, architectural enterprises
and so on. Some small businesses of UK are Trusted Housesitters, Marshfield
Bakery.
MEDIUM BUSINESS
According to the Companies Act, 2006 of UK the criteria for medium- sized
enterprises includes firm with less than 250 employees, an annual turnover of less
than £25.9 million, and a total balance sheet of less than £12.9 million. The mid-
sized enterprise is intended to bridge the gap between small and large enterprises.
Depending on the source, they represent 45 per cent of total employment potential
and 33 per cent of GDP. As a result, the medium- sized business is considered as
the support system of economy, since it encourages growth by providing a diverse
range of job possibilities and meets customer satisfaction by establishing new
markets with a fierce competitive opportunities/ advantages (Kotler, Kartajaya and
Setiawan, 2021). This business form initiates with the slow and steady development
of lucrative small enterprises, with the corporation getting a significant portion of the
income earned from sales as well as increased profit margins. Northern Monk Brew
Company, which has about 250 employees, Verdant Leisure, etc., are examples of
medium-sized companies.
LARGE BUISNESS
Unlike other forms of business, large businesses engages to offer a wide
choice of products or services to their target audience. Large enterprises, defined as
those employing over 250 employees, account for 40 percent of total employment
opportunities and over half of total UK turnover. They tend to have a large
distribution network through effective communication channel and a strong presence
across the country. In addition, large companies are aiding and abetting small and
medium-sized enterprises. This form of business has a hierarchical structure with an
ability to react to changing business environment, as well as comprises effective
organizational structure and an efficient customer-company communication channel.
Therefore, it helps to create economic opportunities, protect the environment and
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provide another competitive advantages. Unilever, British American Tobacco, HSBC
Holdings, Diageo, Burberry are some popular brands with large business market.
Section 2: Different companies from sole traders to
cooperatives and Limited Liability Partnerships
SOLE PROPRIETORSHIP
This is the type of enterprise in which only one person contributes, owns and
manages the enterprise, in its entirety and only. Liability under this kind of business
is unlimited and the sole merchant is personally responsible for the debts and
obligations of the business. Since the owner and the entity are practically identical,
the concept of a single entity does not apply to such an undertaking (Kapoor and et.
al., 2021). It is easy to set up a business with fewer formalities and simple legal
procedures. Even the start-up costs of sole proprietorships are lower than those of
other forms. One of its demerit is that the liability is unlimited which makes sole
trader to sacrifice personal assets to set off company’s liabilities. One of its
advantages is that the solo trader is not required to reveal his or her accounts or
other necessary papers publicly, and so enjoys secrecy. The examples of sole
traders are carpenters, plumber, electrician, person working as freelancer and so on.
PARTNERSHIP
Partnership Firm requires at least two partners, each contributes towards
capital value and further shares profit or loss in reasonable manner as agreed upon.
It is likely to constitute an act of partnership through partnership agreement in order
to reduce conflicts, either verbally or in writing. In contrast to other forms of business,
the partnership entity is easily formed with simple procedures. As the liability is
unlimited so the partners are jointly and severally accountable for the debts of the
company. One of its advantages is that the business is funded by the number of
partners involved. Even this form enjoys flexibility in the workplace without any
government interventions. Moreover, the level of risk is evenly distributed among the
partners, as agreed. Another unique aspect is the ability to transfer interests to an
external entity with mutual permission from all partners (McDaniel and Pease, 2021).
Also partners jointly participate in the decision-making process. A few common
examples are WhatsApp, Red Bull, Twitter, Spotify and others.
LIMITED LIABILITY BUSINESS
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The limited liability enterprises encompasses the characteristics of the
partnership as well as the company. This type of partnership is composed of two or
more members, one of whom is the general partner and the other is deemed to be a
limited partner. Moreover, liability under this form of activity is limited, which means
that the partners are not obliged to sacrifice personally for the debts of the company.
This form of business benefits from the notion of “perpetual succession”, which
means that partners can come and go, but the business remains in existence. These
businesses are required to comply with corporate regulations, but they have greater
flexibility in terms of taxation and appropriate tax plans. They also have significant
financial resources to support them. They are not cost effective in terms of time and
efforts unlike other kinds of companies. Certain companies include Oxfam, Barclays
Bank, Sainsbury, etc.
PUBLIC LIMITED LIABILITY BUSINESS
This form is expressed as the distribution of ownership into shares available
for public trade on a stock exchange (Okada, 2021). The owner can raise money by
issuing shares or bonds and ensure its long-term sustainability by distributing risk
among the owners of the company. In the market, this form of enterprise offers more
opportunities for growth and long term success in the marketplace. This form of
business presents greater potential for growth and development in the market than
other sorts of businesses. The owner must demonstrate openness in both in the
decision-making process and in the company's results, must be transparent and,
consequently, not confidential. In this type of business, funds are generally obtained
from a variety of sources and financial institutions, including banks, are the most
common to provide financial assistance. The most popular instances are HSBC
Holdings, Rolls-Royce Holdings Plc., Royal Dutch Shell, etc.
COOPERATIVE
A cooperative is also a legal entity and a non-profit organization that serves a
goal other than profit. The cooperative's goal is to boost members' economic
interests by allowing them to freely engage on an equal footing. The secondary
concern for these firms is profitability. Co-operative fosters local culture and value
within society (Rozbicka and et. al., 2021). In addition, adopt a democratic
management with appropriate organizational structure and leadership style.
Moreover, with a low return on equity, the return on investment in the form of
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dividends is also low. Some examples of UK cooperatives are Weaver Street Market,
Select Machine, Lincolnshire Co-operative and so forth.
Section 3: Different business structures and external
factors affecting business
3.1 Identification of different organizational structures and
explaining how does organizational structure affect business
productivity
The organizational structure is key to defining the roles and responsibilities, as the
absence of such a structure can lead to an inefficient chain of command and
ineffective management process in the organization. The delegation of authority,
positions, and duties, as well as the flow of information throughout the organization,
are all outlined by the company's structure. The absence of structure has a
detrimental effect on the company. In order to reach targeted goals effectively and
efficiently, businesses must develop and implement an effective organizational
structure. The two significant organizational structure are discussed below.
DIVISIONAL ORGANIZATIONAL STRUCTURE
This structure is appropriate for company’s growth and success for long term.
The divisional structure divides each organizational responsibility into different
divisions. This is the greatest organizational structure for firms that wish to grow and
prosper over time. The corporation is divided into separate divisions depending on
capital, goods, services, or geographic areas under this organizational structure.
Each division maintains its own resources and tasks in this system. The structure
provides a clear chain of responsibility as well as a strategic perspective of activity
and rewards in order to meet organizational goals. The drawback of this structure is
it’s inside duplication of functions leading to dysfunctional relations, competitiveness
and other adverse impacts on divisions (Aloise-Young and et. al., 2021).
FUNCTIONAL ORGANIZATIONAL STRUCTURE
This is the most popular and oldest design because it divides the
organization's core functions into discrete classes. The organization structure seeks
to separate critical activities into multiple different job functions in order to achieve
desired objectives effectively and efficiently. Employees were organized according to
their expertise in this arrangement, which resulted in client satisfaction. Furthermore,
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this structure is excellent in quickly resolving challenges through a well-thought-out
decision-making process. It also aids in the maintenance and improvement of
working relationships (Masa’Deh and et. al., 2021). There are no misunderstandings
or disagreements since the roles and duties are clearly established. The structure's
disadvantage is that separated personnel result in inadequate communication
channels, which leads to misunderstandings. Due to a lack of creative capabilities at
work, the structure lacks flexibility.
3.2 How different external factors affect the performance of a
business – PESTLE Analysis
A range of external elements have an impact on an organization's performance.
The PESTLE analysis is used to evaluate external environmental factors. By taking
into account the changing environment and the activities that an organization
undertakes, it's an excellent strategic tool for determining the worth of a company
while taking into account the changing environment and the operations that it
oversees. Further, Sainsbury Company is utilized to detect market situations and
create effective modifications in order to comprehend these elements (Rees and
Smith, 2021).
 Political: It involves government involvement, such as the Brexit impact,
which has resulted in a drop in the company's revenues. Even the pandemic
crisis was devastating and had a negative impact on company.
 Economic: Economic considerations impact company activity, such as
inflation induced by the epidemic, which resulted in a drop in customer
purchasing power. Another effect is the currency's continued fluctuation.
 Social: Customers have become more health sensitive as a result of the
epidemic, and they now seek high-quality products and services at a
reasonable price.
 Technological: Because of the accelerated advancement in the technology,
Sainsbury's began offering online shopping to their customers. In order to
compete in today's economy, technology must be updated.
 Legal: The government's laws and regulations must be followed by the
company. In the face of a pandemic, Sainsbury Company, for example, is
adhering to social distance standards.
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 Environmental: To achieve a competitive edge in the market, environmental
behaviors must be supported. Sainsbury's, for example, uses biodegradable
packaging with the goal of recycling waste items.
Conclusion
The report ends with the brief study of different sizes and types of company
along with appropriate examples. A number of aspects that impact growth and
organizational structure were also discussed. Furthermore, primary organizational
structures are discussed accompanied by PESTLE analysis to better understand
impact of various external factors on business operations.
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Reference List
Books and Journals
Aloise-Young and et. al., 2021. Overcoming barriers to direct current power: Lessons
learned from four commercial building case studies. Energy Efficiency. 14(1).
pp.1-17.
Kapoor and et. al., 2021. A socio-technical view of platform ecosystems: Systematic
review and research agenda. Journal of Business Research, 128, pp.94-108.
Kotler, P., Kartajaya, H. and Setiawan, I., 2021. Marketing 5.0: Technology for
Humanity. John Wiley & Sons.
Masa’Deh and et. al., 2021. The impact of business intelligence systems on an
organization’s effectiveness: the role of metadata quality from a developing
country’s view. International Journal of Hospitality & Tourism
Administration. 22(1). pp.64-84.
McDaniel, J. and Pease, K. eds., 2021. Predictive Policing and Artificial Intelligence.
Routledge.
Okada, E., 2021. Research Questions and Frameworks. In Management of Science-
Intensive Organizations (pp. 3-37). Palgrave Macmillan, Cham.
Ott, J.S. and Dicke, L., 2021. The nature of the nonprofit sector. Routledge.
Rees, G. and Smith, P. eds., 2021. Strategic human resource management: An
international perspective. Sage.
Rozbicka and et. al., 2021. The Organizational Development of Nongovernmental
Organizations in Central and Eastern Europe. In Achieving Democracy
Through Interest Representation (pp. 115-136). Palgrave Macmillan, Cham.
Savvides, E. and Stavrou, E., 2021. Purpose, Meaning, and Well-Being at
Work. The Palgrave Handbook of Workplace Well-Being, pp.897-923.
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